A Quick Guide to Commercial Real Estate Loans, Bridge Loans, Private Money Loans

If you plan on entering the world of commercial real estate, the likelihood is that you will need loans to acquire properties. There are numerous banking options available to property investors, each with advantages and disadvantages. Here is a quick rundown of some financial instruments at your disposal and what you must provide in order to obtain one.

What Types of Real Estate Loans Are There?

The following are four real estate loan options available for property seekers.

1. SBA 7(a) Loans

The Small Business Administration backs these funds, making them especially well-suited to investors who want to purchase commercial properties. Multiple types of SBA loans exist, with many able to provide financing of up to $5 million. If you require more backing than that, apply for a CDC / SBA 504 loan.

2. Commercial Mortgages

Mainstream banks and lenders offer mortgages that typically last between five years and two decades. This option is most appropriate for those who have good credit.

3. Commercial Bridge Loans

Bridge loans are intended to provide temporary financial relief while a more permanent money solution is sought. Because of this nature, they typically run for short terms of no more than a year.

4. Commercial Hard Money Loans

Similar to bridge loans, these alternative funding solutions are best for transitory situations. Money can be provided extremely quickly. Hard money loans are even available to those with poor credit. Their downside is that they typically have high interest rates. 

Research every financial avenue in front of you before deciding which is most appropriate.

5. Commercial Private Money Loans

Private Money Loans are very useful in getting money very quickly and at a better rates compared to hard money lopans

What Must You Provide To Obtain a Real Estate Loan?

Like with any other form of financial backing, applying for a real estate loan requires extensive documentation that proves your economic intentions rest on solid ground. Prepare a thorough business plan, complete with a balance sheet of projected expenses and profits. Documentation outlining the incorporation of your venture remains essential. Tax information must be at the ready, both personal and business.

Even if you provide all of the above, your lender may request clarification or ask for additional documentation. Mentally prepare yourself for multiple rounds of back and forth. This aspect of the application process can make approvals take significantly longer than anticipated.

Acquiring a commercial real estate loan can be confusing and anxiety-provoking, but it doesn’t need to be overly painful. Research the alternatives before you, make a choice, and then diligently gather information to include with your application. Before you know it, the money you need may be within reach.

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